Bitcoin: Nigeria Bites Back Against Cryptocurrency Trading

Bitcoin. The currency of choice for drug dealers, terrorists, investors, spaceship enthusiasts —  and ordinary people, including many of us who just want to get paid for an honest day’s work.

BITCOIN. Because of its decentralised nature, it’s almost impossible to control how it moves. Like any cryptocurrency, that’s a huge part of its appeal. And that’s also what makes it a threat.

Bitcoin. Not available in Nigeria. Try again later.

Get paid, pal

A few weeks ago, I was notified that payment for work I’d done had been made to a PayPal address I had provided. It wasn’t the first time — I’ve been working with this company for most of 2020.

It’s not easy to get your own Paypal account in Nigeria, so I had an arrangement with a friend who did have one: whenever I was paid she would transfer the funds to my Nigerian bank account, using a remittance service.

In this case, it was Transferwise, one of the international money transfer operators (IMTOs) many here on the continent and in the diaspora are already quite familiar with. Others include World Remit, Mukuru, Western Union and the like.

Most of these companies allow for cash pick-ups, or mobile-money deposits linked to your cellphone — or they can even deposit money straight into your bank account. They certainly could here in Nigeria … until two months ago.

No money, no problems

On 4 December, the Central Bank of Nigeria (CBN) announced a new policy that made it nearly impossible to make direct payments to Nigerian bank accounts using these remittance services.

The central bank’s announcement — widely thought to be in response to #EndSARS protests —  instructed banks to limit all diaspora remittances to “domiciliary” accounts in the name of the beneficiary. This is a type of foreign currency account that allows the receiver to receive payments in non-Nigerian currency and exchange it to naira. But to get one of these accounts you need multiple references, as well as a $100 minimum deposit to set it up.

Without a domiciliary account, the bank could still pay you in foreign currency, but then you need to fill out forms and pick it up over the counter. And then it’s up to you to exchange it for naira: either at the bank, or on the black market if that’s your thing — with all the extra fees and criminal liability that entails.

The hassle really starts to outweigh the hustle, in other words. Which, I guess, was the point.

The central bank had other points to make: it also instructed banks to close all naira accounts opened specifically to receive inflow from IMTOs. In effect: no more remittance payments. This development has greatly troubled Nigerians in the diaspora trying to send money to their families, as well as those living in the country and earning in non-Nigerian currencies. Like freelance journalists writing for The Continent, for example.

Now, when you open Transferwise and attempt to make a transfer in naira you get the message, “sorry, we’ve closed all transfers to NGN due to new regulations from the Central Bank of Nigeria.”

Some other IMTOs have workarounds, like cash pickup, but it’s messy. Too messy, if you’re trying to run a legitimate business.

And, so, I was stuck. The work was done, the payment had been made — but I couldn’t access the funds. Eventually, however, I asked for help on Twitter, and so it was that bitcoin appeared on my radar.

Welcome to the global economy

Several people suggested I try SendCash Africa, which is owned by BuyCoins, a Nigerian app that helps Nigerians to buy and sell bitcoin and other cryptocurrencies with their Nigerian debit card.

According to Ire Aderinokun, a developer at BuyCoins, the company wants to put Nigerians on an equal footing with the rest of the world. ‘‘The core goal is to enable Nigerians and Africans to participate in the global economy,” he said. ‘‘For no one to be limited by their local currency.”

This is good news for ordinary people trying to make a living! For central banks responsible for managing local currencies? Not so much. Their job is to manage the economy, after all. And sometimes the responsibility to manage gives way to the urge to control.

During the #EndSARS movement, international donations were made to Nigerians who were at the front line or organising protests in their states, as well as to Feminist Coalition. At first, these donations were made using the IMTOs or remittance services.

But when the central bank began to “manage” the accounts of known #EndSARS activists, and issued its December limits on remittance mechanisms, Feminist Coalition created a bitcoin wallet, and bitcoin became the preferred way to donate to the protests, outside the central bank’s influence. This arguably made it possible for the #EndSARS movement to hold out for as long as it did.

So Feminist Coalition was receiving donations, and, thanks to a relatively straightforward sign-up process, I, too, was able to get paid at last.

Until last Friday. On 5 February, the central bank “banned” bitcoin, too.

Nigeria puts the ‘ban’ in ‘bank’

In a circular cautioning the public on the risks of transacting in crypto, the central bank informed banks that dealing in cryptocurrency was prohibited, and asked them to please send over a list of any individuals dealing in cryptocurrency — and close their accounts while they were about it.

The letter essentially banned crypto-dealing in Nigeria with immediate effect. I contacted the Central Bank of Nigeria to ask about its reasons for doing this, and how this might affect business, but no one got back to me.

However, according to Abubakar Idris, a financial journalist at Stears Business, the central bank is sticking to its story that blocking the trading of cryptocurrencies such as bitcoin is part of its strategy to prevent financial fraud and the financing of terrorist operations.

“These are legitimate concerns,” Idris told me. “Nigeria does have an infamous international status for scams and online fraud; and has been fighting the Boko Haram terrorist group for more than 10 years now.”

Nevertheless, he believes there are other motivations at play.

“The most crucial of all is CBN’s focus on stabilising the exchange rate. Cryptocurrency gave everybody — businesses and individuals — a way around currency issues, getting better exchange rates and rendering central control measures ineffective,” he said. “By making it harder for people to carry out cryptocurrency transactions, the CBN wants to take back control of the country’s international payment system.”

It worked. At the moment, the only way to transfer money to a Nigerian bank account requires the person receiving it to go to a bank to cash it. This method is easily controlled by the government — as was demonstrated during #EndSARS.

But cryptocurrencies have an irritating habit of bouncing back.

Here comes the bounce

In 2020, BuyCoins, the parent company of SendCash, processed crypto transactions worth more than $140-million, according to stats published by its chief executive, Timi Ajiboye. After the December crackdown, SendCash became a primary go-to for Nigerians abroad trying to send money home, and for remote workers and freelancers (including the odd journalist) to get paid.

However, with the new directive of 5 February, the company’s entire business model appears to have been dismantled, leaving many without an easy way to move money. And they’ve gone quiet. BuyCoin and other crypto companies have declined to speak to the press since the directive, so it isn’t yet clear what their next move will be. Crypto is nothing if not cryptic.

But many in the tech sector expect that they will innovate around it somehow.

‘‘Startups themselves are developing workarounds against the CBN’s policy,’’ Idris said. ‘‘In the next couple of weeks, things may feel weird and people may have to learn new ways to deposit money into their crypto wallets. But things will pick up after that. I don’t expect cryptocurrency trading to decline. I actually believe the CBN’s policy has made crypto more popular.”

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